Investment behaviour analysis of oil and gas exploration and production: evidence from the United Kingdom continental shelf.

Hydrocarbon exploitation in the United Kingdom Continental Shelf (UKCS) basin, which continues to play an important role in the UK economy, has been in a state of continuous reserves and production decline from the turn of this century. Current efforts by government and industry to improve prospects in the basin, such as implementation of the recommendations of the Wood Review on maximising economic recovery of hydrocarbons in the UKCS (MERUK), lack an assessment of historical investment strategies of E&P firms in response to the decline that will support the changes in business and regulatory efficiency recommended in the review. Also, the clamour for NetZero greenhouse gas emissions in the UK by 2050 which led to the introduction of the North Sea Transition Deal (NSTD), expects to achieve the dual objectives of maximising hydrocarbon recovery, while decarbonising the UKCS basin towards net-zero 2050. Using robust regression analysis and autoregressive moving average techniques, this study uses the rate and timing of wells drilled in the UKCS basin as proxies for investment, to investigate the factors that affect investment in the UKCS. The study focuses on such factors as the level of financial risk sharing by oil and gas exploration and production (E&P) companies operating in the UKCS basin, increasing UKCS basin maturity, and uncertainty resulting from price instability. Results from the study indicate a tendency by E&P companies not to collaborate through financial risk sharing, thus supporting the findings of the Wood Review of lack of cooperation by firms in the UKCS. In addition, the study finds that with increasing basin maturity, the duration to investment for the development of hydrocarbon discoveries in the UKCS also increases, which negates the MERUK objectives of effective asset stewardship. Furthermore, the study explored the extent to which UKCS E&P firms may have explored asset substitution (i.e. choosing to develop either crude oil or natural gas discoveries), when the pricing of the other hydrocarbon is volatile, with volatility implying uncertainty of the hydrocarbon to be deemphasised relative to the hydrocarbon with stable prices. The latter result also serves as a prognosis for asset substitution between hydrocarbons and renewable energies towards meeting the NSTD objectives of a decarbonised UKCS, while ensuring the MERUK objective of maximal extraction of all economic hydrocarbons in the UKCS basin is met.

Grantor dc:publisher.institution

Robert Gordon University

Year dc:date.issued

2025

Author dc:creator

• Buba, Ibrahim Muhammad

Advisor dc:contributor.advisor

• A. Asekomeh, J. Tong, F. de Oliveira and O. Osobajo

• Oil and gas industry
• Offshore oil and gas
• Hydrocarbon recovery
• Wood Review
• Investment behaviour
• Financial risk sharing
• Business risk management
• Net Zero Strategy
• United Kingdom

Language dc:language

en

Identifier

oai:rgu-repository.worktribe.com:3210306
https://doi.org/10.48526/rgu-wt-3210306

Author Identifier

0000-0002-0481-0428

OAI identifier oai:identifier

oai:rgu-repository.worktribe.com:3210306